Jennifer Lang Financial Services, LLC.​Smart Money StrategiesWisdom For the Life You Want

“Inflation is as violent as a mugger, as frightening as an armed robber, and as deadly as a hit man,” Ronald Reagan once famously said.

And the worst time to try to fight this formidable foe is when you are in retirement, living on a fixed income. Many people have some employment, or some involvement with entrepreneurship, for a stream of retirement income.

But chances are they don't offer wage increases, or other inflation-countering benefits that you might have had in your working years, to help you keep pace.

Annuities are one of the few ways to obtain retirement income that is paid out as long as you live, making them a popular component of many retirement plans.

Investors have been using fixed annuities and fixed index annuities to provide lifetime income. These guaranteed income streams cover monthly costs and help people maintain their standard of living.

But if the annuity payout is fixed at the outset of the contract, by design it can’t be increased to keep pace with inflation. Should inflation rise 10% over time, for example, the buying power of a $3,300 monthly annuity payout erodes to $2,970.

This threat has the potential to affect a retiree’s lifestyle and could even require making unwelcome cuts in spending.

So how can investors seeking the benefits of annuities manage this inherent “inflation risk” and offset its impact? These are just a few of the ways.

Receive Annuity Payouts for Shorter PeriodsAnnuities offer fixed-income streams over a lifetime. But there are other options when choosing an annuity strategy to address inflation. Period-certain annuities offer payouts for a predetermined duration, for example for 5 or 10 years.

The timing of Medicare and Social Security benefits can make as much a difference as hundreds of thousands of dollars in retirement income. And if you have another guaranteed income source with a pension?

While it doesn’t matter with some pension plans, choosing to delay when you start pension payouts could help further maximize your lifetime income. Of course, that assumes you opted for an annuity pension option over a lump-sum option.

These delay strategies could pose a cash-flow challenge for someone retiring early. How do you bridge the income gap while delaying these benefits? This is where a fixed annuity with a period-certain payout can come in handy.

Say someone wishes to retire at 62, but to claim Social Security benefits at 70. With advanced income planning, the following scenario could help them come out on top:

1. Buy an annuity that, starting at 62, pays a fixed monthly amount that covers their cash-flow needs for eight years until they have maximized their Social Security benefits at 70.This strategy would build an “income bridge” between when they retired and starting their benefits at 70. And while living expenses may go up, the short timespan means the retiree shouldn’t be too exposed to increased inflation risk.

Purchase Annuities in PhasesAnother strategy to combat inflation is an annuity-laddering strategy. This is a process in which several annuities are purchased over time.

The annuity contracts have different maturation dates and time-frames for penalty. So, your financial professional would need to time the purchases so you wouldn’t have any adverse effects from ill-timed transactions.

Just like before, let's say your income strategy includes an annuity with a period-certain payout, say for 5 years. This could provide you with an income stream that starts immediately.

Meanwhile, you might eventually put a bucket of money into another annuity, which would let your retirement dollars grow at a tax-advantaged, compounding rate for future income. It might also benefit from other features, like annuity bonuses, that help boost growth potential.

Then, at the end of the respective payout period, the new annuity replaces the other’s income stream. Depending on the interest-rate environment, the new annuity might offer higher payouts that keep pace with the new cost of living.

How Annuity Laddering Can Help Your RetirementA laddering strategy can be beneficial in a number of ways:

More flexibility with multiple annuity purchases instead of committing to one large lump-sum annuity purchase

Gives some contracts more time to mature and rise in value so you can have more income later on

Reduces the buying risk that possibly comes with just one annuity purchase

If there are any gaps created by lower interest rates, income-value bonuses or other bump-ups in income payouts with a new annuity can help offset the gaps

Incorporate Inflation-Adjusted AnnuitiesAnother option is to use "inflation-adjusting annuities," which are often fixed annuities with some sort of inflation-adjusting rider. Some experts in the annuity industry call these "real annuities" because of how they are designed to increase payouts relative to overall cost-of-living increases.

While these contracts have a place in income planning, they might not necessarily be the most advantageous solution for you. Why is that? Because the insurance carrier takes on the risk of inflation itself.

This is reflected in the payout amounts you receive.

An inflation-adjusting annuity payout will be smaller than a fixed annuity payout from its beginning. And from there, it could take years before your real annuity payout equals out to what a comparable, non-inflation-adjusting fixed annuity would give you.

As Steve Parrish, Co-Director of the Retirement Income Center at the American College for Financial Services, writes:

"Research by Morningstar’s director of retirement research, Dr. David Blanchett, suggests that real annuities are 'a bad deal.' The concern is that research suggests the cost of a real annuity is expensive compared to a fixed income annuity. You get a lot less for a monthly benefit to possibly get more in the future. It may take 12 to 20 years for the real annuity payout to equal what a comparable non-inflation adjusted fixed annuity would pay."

Anticipate the Issue During Your Accumulation YearsIf you are in your late 40s or 50s, there is a real advantage to planning for your retirement now. Why?

Because you can start planning for the future impact of inflation while in the accumulation stage of your financial life. With more time before you need to start collecting retirement income, you can pencil out what your retirement spending is truly likely to be.

How will you know what level of income you need to receive – and protect from inflation – until you know your estimated monthly outgo?

When creating realistic future retirement spending expectations, it helps to keep in mind the three stages of retirement. Perhaps you have heard of something like this before:

Go-Go years, 60-75: Finally, the retirement you have dreamed of begins! You are feeling fit and exploring hobbies, travel, and adventures

Slow-Go years, 75-90: With all the kids and grandkids grown and living their lives, selling the house and downsizing might be attractive

No-Go years, 90+: Happy to greet each day, living a close-to-home or assisted lifestyle

Create an Early Strategy to Counter Inflation RiskThis planning strategy gives you an idea of not only how much money you will need. There is also the source of the funding (and its tax status) that the annuity will need so you meet the spending demands of your future lifestyle.

Your current financial strategy can be modified with these expectations set.

You might start putting aside money in another new bucket to reach the amount of funding needed. Or you might divert some of your current retirement savings into a new bucket for your annuity policy – for future income growth.

Leave Behind the Bells and WhistlesThink about when you shop around for a car. There are plenty of opportunities to add upgrades and features.

But they aren’t going to get you to your destination any better than if you had kept that money in your pocket. The same is true with annuities.

The cost of annuity bells and whistles takes away pennies out of every dollar of premium toward other features or benefits that might not be income-related. Consider looking into fixed-type annuities with simpler features, or even deferred income annuities, to fuel your retirement cash-flow.

Explore Deferred Income AnnuitiesDeferred income annuities offer some level of accumulation during the surrender period. Then they can provide simple streams of income for you later when you retire.

You give a lump-sum payment to an insurance company. In return, it provides a guaranteed lifetime income that begins at a preset future date.

The insurance carrier calculates the payout on current economic conditions and its prediction of future conditions. Because of this, there is a risk of inflation eroding the purchasing power of the payout.

The advantage of a deferred income annuity is that insurers aren't obligated to pay additional contractual benefits. So, they can pay a much higher monthly benefit. With less “expense drag” for the insurance company before a deferred income annuity’s payout starts, a higher payout may be available.

This strategy can serve to offset any inflation risk associated with a fixed payout. The inflation risk is also minimized, since the selected age to begin payouts is often later in life.

Creating the Right Income Strategy for You

In today's financial marketplace, there are more annuities than hedge funds available. You might benefit from the help of someone who can review your unique situation and show you the available options that are appropriate for you.

An experienced financial professional will be knowledgeable of inflation risk, not to mention other potential hazards to your retirement income. They can help you explore various potential solutions that help you maintain your ideal lifestyle.

If you are ready for personal guidance, financial professionals at we stand ready to assist you. Connect with a retirement planning expert now. Click here....

​About 58 percent of Americans have access to a 401(k) or a similar employer-sponsored retirement plan. A 401(k) is an effective, convenient way to save for retirement. The money is automatically withheld from your paycheck using pre-tax dollars, and you can contribute up to a set limit each year — plus an additional “catch-up” amount if you’re age 50 or older. You’ll pay income taxes on contributions and earnings when you withdraw funds. If you access your funds before age 59½ you’ll also pay a 10 percent penalty tax. Also keep in mind, the money in your 401(k) is exposed to market volatility.

About 75 percent of employers with 401(k) plans offer a matching program. A typical employer match is 50 percent of the employee contribution, up to 6 percent of your salary. So if you have a 401(k), your first retirement-saving priority should be to max out your employer match — it’s free money!

But the 401(k) isn’t the only game in town. If you want to save more than the amount your employer will match, don’t have access to a 401(k), or want to ensure a guaranteed lifetime income, here are three options to consider:

Traditional IRAYou can contribute up to $6,000 to an Individual Retirement Account in 2019 — $7,000 if you’re 50 or older. If you don’t have a 401(k) or similar retirement account at work, you can deduct your full IRA contribution from your taxes. Married couples can each have their own IRA and can each take advantage of the full combined contribution tax-deferred. As with a 401(k), you’ll pay taxes on contributions and earnings when you withdraw funds. Also like a 401(k), you’ll pay an additional 10 percent penalty if you withdraw funds before 59½. A traditional IRA is subject to required distributions after age 70½ and you can’t make additional contributions to your account once you reach that age.

Roth IRARoth IRAs have the same contribution limits as traditional IRAs. You can’t deduct Roth IRA contributions from your current taxes, but you can withdraw both contributions and investment earnings tax-free after age 59½ if the account is at least five years old. Unlike a traditional IRA or 401(k), there’s no penalty for withdrawing contributions before 59½, although there is a 10 percent penalty on early withdrawal of account earnings. Unlike a traditional IRA, you’re not required to withdraw funds by 70½ and you can even keep contributing to the account after that age. You can contribute to both a traditional IRA and a Roth IRA, but your total contribution can’t exceed the annual limits set by the IRS.

AnnuityOne key thing 401(k)s and IRAs (excluding annuities) have in common is that when your money is gone, it’s gone. Annuities, on the other hand, provide insurance against the risk of outliving your money after you retire, and may also provide protection from loss due to market downturns.

Life expectancy has been increasing, with the average 65-year-old expected to live to about age 84 for men, age 86 for women, and age 90 for at least one member of a married couple. And while most of us probably won’t live to be 100, about three percent of 65-year-old men and six percent of 65-year-old women can expect to see the century mark. Whether you live to be 80, 90 or even 100 and beyond, it’s important to consider an annuity that guarantees an income for life.

Not sure which retirement planning options are right for you? Make an appointment with a WFGInsuranceQuotes.com financial professional to discuss your options for a retirement income strategy that fits your needs and goals.

Saving and paying for college can be a challenging goal and you may be among the many people who worry about the financial pressure that funding higher education can bring. The cost of college continues to rise: average tuition and fees are $35,676 at a private school, $9,716 for state residents at public colleges and $21,629 for out-of-state students at state schools. Thankfully for parents and grandparents, it's never too early to start saving and there are many options to help you prepare for one of the most important milestones in the lives of your children or grandchildren.

529 plansA common option used for paying for college and educational expenses is a 529 plan, which is an education savings plan sponsored by a state or state agency. A 529 plan can be purchased not only by parents, but also grandparents and other relatives. When you purchase a 529 plan, your earnings grow tax-deferred and any qualified withdrawals are tax-free. As a child reaches college age, he or she can use the accumulated funds to pay for qualified expenses including tuition, room and board, books and computer equipment. While 529 plans have many advantages and can be useful in preparing for the future, there are limitations to consider as well.

Limitations of 529 plans include:

An account can lose value due to market downturns

You pay penalties if the money is not used for education purposes

The account earnings can affect an application for financial aid

Many plans include yearly fees and administrative costs

Plus, if your child receives a scholarship, you will likely only need a portion of the money saved in your 529 plan. If you end up with remaining funds or if a child decides not to enroll in school, the beneficiary can be changed to another family member. However, if you do not have other family members looking to attend, you may have to pay significant penalties to withdraw your savings for other purposes, depending on the rules of your state's 529 plan.

Using an annuity One tool to consider as part of an overall college saving strategy is a fixed or fixed indexed annuity. A significant benefit of these products is your account value can grow tax-deferred and is protected from downside market risk. So when the market is up, your money can grow, but when the market is down, you do not lose any of your hard-earned savings. Plus, if your child receives a scholarship or decides to pursue another path besides college, the money in your annuity can be accessed for other purposes.

Keep in mind that annuities are designed to help you reach long-term savings goals. While most annuities allow you to withdraw a certain amount each year without penalty, you'll likely pay charges on withdrawals over that amount during the annuity's withdrawal charge period. This period typically ranges from five to 10 years or more, depending on the annuity.

Helping pay tuitionAs with many financial plans, there is no time like the present to begin saving. An annuity purchased when your children are young can assist with tuition costs down the road. One option would be to purchase an annuity with a withdrawal charge period that coincides with the length of time it takes for your child to reach college age. For example, if on your child's 8th birthday you purchase an annuity with a surrender charge period that ends in 10 years; your child will be 18 and entering college. At this time, you'll be outside the withdrawal charge period, meaning you'll have full access to the annuity's value to supplement tuition payments.

It's important to remember that withdrawals from an annuity may be subject to state and federal income tax. In most cases, withdrawals taken before age 59½ will also be subject to a 10 percent IRS penalty.

Paying off student loansGraduating with student loan debt comes with tremendous responsibility, especially since interest continues to accumulate as time goes on. More than 2.5 million students have student loan debt greater than $100,000 and repaying those loans can be a significant hurdle. One way to help reduce a student loan balance is using income payments from an annuity. Over time, your premiums grow tax-deferred and then at a later date, you can elect to begin receiving payments. Depending on the type of annuity you choose, you can receive income immediately or several years later. These funds can then be used to help reduce any remaining student loan balance. Remember that annuities specify that you must be a certain age before starting income payments.

As you begin to take steps toward saving or paying for college, talk to your financial professional about which solutions can help make higher education accessible and more affordable. By starting the conversation now, you can bring the dream of your child's or grandchild's education within reach while still meeting your other long-term goals.

At WFGInsuranceQuotes.com we use unconventional thinking to bring innovative annuity solutions to you that can help make your retirement dreams a reality. Contact us today for a free no obligation consultation.

“What can we do to not run out of money in retirement?” and “Will we have enough money to last as long as we are retired?”

Those are the two big questions which nearly all retirees have. For most of us, though, they are top concerns that what we all worry about as we approach retirement. Then we think about quite often as we move through our retirement years.

Good news, however. To help alleviate the worrying and wondering, the solution is -- quite simply -- to have a PLAN.

Planning for How You Won’t Run Out of MoneyIf you haven’t already, you or your financial professional need to set up a 30-year Retirement Plan spreadsheet. This plan will include an integrated income, expense, and balance sheet.

Nobody has a crystal ball as to how long they will live. But you can at least make an educated guestimate by looking at your family history against current statistics, and then balancing that with your gut instinct.

Your best starting income-expense budget model for your plan is the one you are living now, adjusted year-to-year over 30 years, or whatever planning horizon you choose. Be sure to realistically account for taxes and inflation.

While you may be a DIY person when it comes to budgeting and doing your taxes, it’s an excellent idea to seek professional guidance.

Consider taking advantage of the expertise of a knowledgeable financial professional to help you “sanity check” your plan and all its assumptions. A financial professional can help with you that.

Matching Your Retirement Income Streams to Expense TypesHaving budgeted our expenses for a long time, we all know that when it comes to expenses, they range somewhere between these two extremes:

(A) “I absolutely have to pay.”

(B) “I could easily drop this expense if need be.”

So, the typical retiree household expenses can be organized into four PRIORITY classifications:

Priority 1: non-optional expenses for basic survival, such as food, water, shelter, power, and so on

Priority 2: semi-optional “quality-of-lifestyle” expenses that could be reduced if necessary

Priority 3: 100% optional and discretionary expenses that could easily be reduced or eliminated

Priority 4: Random, out-of-the-blue events that may never happen to you, or some may

Some "Priority 4" type expenses can be relating to a major health event, fire or flood disasters, or unexpected support of a family member.

That being said, keep this in mind. The following expenses, classified "1-4," may be different from what you would choose, customized to your life experiences and priorities.

Starting the Process of PlanningWhen matching up your retirement expenses to income streams, it doesn’t really make a dig difference if you start with your expenses first, or your income first.

The process of making the two match up (break-even) is an iterative process.If there is gap between the two, you either have to fit your projected expenses to the retirement income you have. Or you will have to figure out how to increase your income to cover your projected expenses. That is Retirement Planning 101!

Since these are “must-pay” expenses, they need to be covered by retirement income streams that are essentially fixed, monthly recurring for a lifetime, and guaranteed:

Social Security: monthly payments for you and/or your spouse

Pension: pension payouts for you and/or your spouse

If there is a surplus of income covering Priority 1 expenses, some or all of this surplus can be used to first close any gap in Priority 2 expense funding. Then secondly any gap in Priority 3 expense funding.

Covering Income Gaps in Living ExpensesIf you are projecting an income shortfall in your plan, one strategy would be to createan annuity. Let's consider a hypothetical.

As an example, assume you project that your Priority 1 Income during your first 10 years of retirement is short $300 per month.

Say you retired at age 60, and you had a monthly income gap of $300 you needed to cover. And you needed to cover this monthly income gap for 10 years.

Consider this a ballpark number for purposes of demonstration. But for preliminary planning, you would need about $31,850 to fund a fixed 10-year immediate annuity to cover your monthly income gap of $300. Keep in mind that this initial premium will vary among insurance carriers.

To fund this, you could use money from your IRA, from your qualified employer retirement plan, from after-tax savings, or from liquidated dollars from the sale of an asset.

Finding the Right Annuity Strategy for YouApart from covering an income gap between your monthly living expenses and your guaranteed income with an annuity, another solution is to create an “income floor” with a guaranteed annuity income stream.

If having a certain floor of income sounds worthwhile to explore to you, ask your financial professional to explain this concept.

And another note: There are many types of annuities. They can be fairly involved in their execution, some annuity contracts require some consumer assumptions, and you should be careful who you choose in the financial services market for guidance.

Not all financial professionals offer the same value in terms of reputation and, more importantly, financial soundness.

Since these are semi-optional “quality-of-lifestyle” expenses, they can be covered by funds from retirement accounts. Your plan should take note, though, that their value will likely fluctuate with the ups-and-downs of the equity markets:

401(k)s

457s

403(b)s

IRAs

Roth accounts

If there is a surplus of income covering Priority 2 expenses, some or all of this surplus can be used to close any gap in Priority 1 expense funding first. Thereafter, it can be used for Priority 3 expense funding second.

PRIORITY 3: Expense-Income MatchingThese would be typical Priority 3 expenses: 100% optional, discretionary expenses that can be reduced or dropped as necessary

Since these are 100% optional, discretionary expenses, they might be covered by certain variable and contingent sources of income:

Employment income

Sale/liquidation of assets

Primary house

Second home (vacation home) or cabin, condo, or timeshare

Appliances, furniture, art, computers, electronics

Automobile(s)

Boat(s)

Hardware, tools, lawncare equipment

Personal property and jewelry

Inheritance(s)

PRIORITY 4: Expense-Income MatchingThese would be typical Priority 4 expenses: Random, out-of-the-blue events that may never happen to you, or some may.

These can include major home repair and upgrades; major health needs, major dental, and major prescription expenses; disability-related expenses; fire or flood disaster costs; or the costs of a family emergency.

These events tend to be costly in nature, so they are typically insured against with:

Flood insurance (typically included as a Priority 1 expense, if required)

Long-term disability insurance (typically only needed during one’s working years)

Long-term care insurance

What insurance coverages to carry, and how much, can be complicated personal questions to answer. They are a perfect topic to discuss with your financial professional.

This will likely take some consideration to figure out what is right for you and your spouse, and how much insurance you can afford.

Other Planning Steps to Not Run Out of Money in RetirementThere's one last question: How much of an estate do you want to pass on to your heirs?

You might think of this as a “PRIORITY 5 Remainder.” But it could be viewed as an “expense” if you are proactively reserving funds for this purpose.

There is no right or wrong answer to this question because it is a choice that is private to you. Whatever your goal is, from “nothing” to “a lot,” it can make a huge impact on your income-expense planning in your 30-year plan.

Just keep in mind these perspectives:

The only rule is your rule

You deserve to be happy and healthy in your retirement

If you determine with a financial professional’s help that need be, work longer and save more to the extent you can to reach your retirement goals

Need Help Planning for Your Money Game-Plan in Retirement?The most important thing? That you start planning, and the best time is today.In survey after survey, retired and working-age Americans who planned ahead for their retirement finances reported many positive outcomes.

When they create a plan with the help of a financial professional, people tend to say they have higher retirement savings, a higher sense of personal financial wellness, and more financial peace of mind about their retirement futures.

Are you ready to start planning for your financial security? Financial professionals can help you ensure you don’t run out of money in retirement and avoid other potential mishaps.

If you believe an annuity is right for you, working with a financial professional can help with your evaluation process and maximize your retirement success.

According to the newest report from the Social Security Administration Board of Trustees, the Social Security program is set to run aground as early as 2034. This is when the supply of U.S. Treasury bonds in the Social Security system runs out, and the program will either have to find new additional sources of funding, or fund benefits out of incoming payroll taxes.

The problem: Projected payroll tax collections won't be enough to pay forecast benefits. Unless the system is fundamentally changed, either there will have to be significant benefit cuts, a major increase in payroll taxes or some other tax to fund the program, or some combination of both.

Absent an intervention, Social Security beneficiaries may face cuts as high as 21%.

The problem will likely not affect seniors currently in retirement. But, today's workers should be aware that future benefits may be much lower than they currently assume, and plan accordingly.

What you can do.

The best thing to do is live on less than you make - and save and invest enough to make up Social Security's shortfall for yourself and your family.

For example:

Max your 401k match.If your employer's 401k plan offers a matching contribution, make sure you take it. It's free money and offers a much better return on investment than your otherwise likely to get, at much less risk.

Fund the maximum IRA you can qualify for.The current limit for both Roth and traditional IRA is $6000 and $7,000 those aged 50 and older. Some income limits apply, but even if you make too much money to contribute to a Roth or to take a tax deduction for traditional IRA contributions, you can still contribute to a traditional IRA on a non-deductible basis. You won't get a current deduction, but you'll still get tax-deferred growth and no current taxes on capital gains and dividends.

Go back and max out your allowable 401k. As of 2019, you can potentially contribute up to $19,000 per year in your 401k, over and above your employer's matching contribution. If you're over 50, you can contribute $25,000. Your account will grow tax-deferred. You just pay income taxes as you take the money out in retirement. If you are covered by a 403(b), speak with your Human Resources department about ensuring you are maximizing your contributions.

Consider annuities. These are Insurance products, but are specifically designed to provide retirement income, as well as tax advantages on growth, similar to non-deductible IRAs. These may be good options for those who have maximized their contributions to IRAs and work workplace retirement plans.

The sooner you begin saving aggressively, in both taxable and tax advantage accounts, the more likely it is you'll be able to take any anticipated reduction and Social Security benefits in stride, when the time comes.

Contact us today and let us customize a free of charge, no obligation strategy to help and protect your future. Click here.

Minimum monthly contributions are $100 if you set an income start date that’smore than 20 years from the date you enroll.The monthly minimum is $200 if you set an income start date that’s 20 years​or less from the date you enroll.Get a free consultation now. Click here!

*Referring SafeMoney.com Advisor: Jennifer LangIf I could show you a way to stay in control of your money until you take your last breath, but instead of giving that money to the government, nursing home or hospital, you could keep that ​

money in the family for generations to come, at the very least wouldn’t you want to know how to do that?​Learn how to protect your money from unnecessary risks.